DENVER, May 15, 2008 (BUSINESS WIRE) -- First Data Corp. today reported its financial results for the first quarter of 2008. Consolidated revenues were up 16% to $2.1 billion. The adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were up 8% to $586 million.
Loss from continuing operations was $222 million, but included $303 million of incremental interest expense, net of tax, and $118 million of incremental depreciation and amortization, net of tax, compared to the first quarter of 2007. Both the incremental interest expense and depreciation and amortization are primarily attributable to the transaction with affiliates of Kohlberg Kravis Roberts & Co. (the "Transaction."). A table describing adjusted EBITDA and reconciling income (loss) from continuing operations to adjusted EBITDA is included in the accompanying schedules.
"Our solid performance in a difficult market reflects our laser focus on execution," said Michael Capellas, Chairman and Chief Executive Officer of First Data. "Going forward you will see us continue to invest actively in new product development and technology innovation."
Effective January 1, 2008, First Data adopted a revised segment reporting structure. The company's segments include Merchant Services, Financial Services, International, Prepaid Services and Integrated Payment Systems. For prior year periods, the company has made available financials realigned to these segments. The business activities of each of these new segments are described in our Quarterly Report on Form 10-Q which was filed today with the Securities and Exchange Commission (SEC).
Segment Results
Merchant Services
For the quarter, Merchant Services generated revenues of $926 million, a growth rate of 10% or 3% excluding reimbursable debit network fees. Revenue growth was primarily driven by continued strong transaction growth. Operating profit was $73 million, down 63% or up 8% to $211 million excluding purchase accounting adjustments comprised principally of increased amortization expense related to the Transaction. Operating profit margin improved to 33.2% excluding reimbursable debit network fees and purchase accounting adjustments, compared to 31.7% in the first quarter of 2007. Reported operating profit margin for the quarter was 7.9%.
Financial Services
For the quarter, Financial Services generated revenue of $706 million, up 1% or flat excluding reimbursables and purchase accounting adjustments. Operating profit was $103 million, down 29% or down 4% to $139 million excluding purchase accounting adjustments comprised principally of increased amortization expense related to the Transaction. The decrease in operating profit was primarily the result of anticipated price compression related to contract renewals and lost business in 2007. Operating profit margin for the quarter was 27% excluding reimbursables and purchase accounting adjustments, compared to 28% in the first quarter of 2007. Reported operating margin was 14.5% for the quarter.
International
For the quarter, International generated revenue of $445 million, up 23%. Revenue growth on a constant currency basis, excluding acquisitions and divestitures, was 5%. This 5% growth was negatively impacted by price compression and lost contracts primarily in our Western European and Asia Pacific businesses. Operating profit was $21 million, down 38% or down 32% to $23 million excluding purchase accounting adjustments related to the Transaction. Operating margin was 5.2% excluding purchase accounting adjustments related to the Transaction compared to 9.5% in the first quarter of 2007. Operating profit included a loss reserve of approximately $6 million for a failed airline in one of International's merchant acquiring alliances and approximately $5 million in incremental investments in data center consolidation, platform initiatives and other expenses related to cost reduction initiatives, which negatively impacted the 5.2% operating margin by 2.4 percentage points during the quarter. Reported operating margin was 4.8%.
Significant Events
On April 28, 2008, First Data announced that it had reached an agreement to acquire InComm Holdings Inc. ("InComm"). The transaction is subject to customary closing conditions and regulatory approvals. InComm is a distributor of gift cards, prepaid wireless products, reloadable debit cards, digital music downloads, content, games, software, and bill payment solutions. InComm also provides stored value product marketing and technology solutions to international markets in Europe and Canada. First Data will acquire InComm for approximately $980 million, plus contingent future payments of up to $250 million over a three year performance period. This acquisition is expected to close in the second half of 2008. InComm will be reported as part of the Prepaid Services segment.
First Data's largest merchant alliance, Chase Paymentech, is 51% owned by J.P. Morgan Chase Bank, N.A. ("JPMorgan"), and 49% owned by First Data. The current term of the existing alliance agreement expires in 2010; however, JPMorgan had the right to terminate the alliance due to the change of control upon the closing of the merger. First Data has extended the time period to exercise this right to allow for further discussions regarding the alliance; however, the company expects the alliance to end prior to its existing expiration date in 2010.
Presentation of Financial Information
The financial information presented in the company's Quarterly Report on Form 10-Q filed with the SEC and in the attached financial schedules for the quarter ended March 31, 2008 is presented for two periods: Predecessor and Successor, which primarily relate to the periods preceding the Transaction and the period succeeding the Transaction, respectively.
Non-GAAP Measures
In certain circumstances, results have been presented that are non-GAAP measures and should be viewed in addition to, and not in lieu of, the company's reported results. Reconciliations to the comparable generally accepted accounting principles (GAAP) are available in the accompanying schedules and in the "Investor Relations" section of the company's website at www.firstdata.com.
Investor and Analyst Conference Call
First Data will hold an investor and analyst conference call and tomorrow, Friday, May 16, at 8:00 a.m. MDT to review first quarter 2008 results. Capellas will lead the call. Also participating will be Kim Patmore, Chief Financial Officer, Ed Labry, President of First Data U.S.A., David Yates, President of First Data International and Silvio Tavares, Senior Vice President, Investor Relations.
To listen to the call, dial +1-877-397-0297 (U.S.) or +1-719-325-4929 (outside the U.S.) ten minutes prior to the start of the call. The call will also be webcast on the First Data website, www.firstdata.com. Please click on the webcast link at least 15 minutes prior to the call. A slide presentation to accompany the call will be included in the webcast and will be made available under the "Investor Relations" section of the website (http://ir.firstdatacorp.com/events.cfm).
A replay of the call will be available through May 25, 2008 at +1-888-203-1112 (U.S.) or +1-719-457-0820 (outside the U.S.) and via webcast on www.firstdata.com. The passcode is "2373479."
Please note: All statements made by First Data officers on this call are the property of First Data and subject to copyright protection. Other than the replay, First Data has not authorized, and disclaims responsibility for any recording, replay or distribution of any transcription of this call.
About First Data
First Data is a global technology leader in information commerce. The company processes transaction data of all kinds, harnesses the power of that data and delivers innovations in secure infrastructure, intelligence and insight for its customers. With operations in 37 countries, First Data serves more than 5.4 million merchant locations and more than 2,000 card issuers and their customers. It powers the global economy by making it easy, fast and secure for people and businesses around the world to buy goods and services using virtually any form of payment. The company's portfolio of services and solutions includes merchant transaction processing services; credit, debit, private-label, gift, payroll and other prepaid card offerings; fraud protection and authentication solutions; electronic check acceptance services through TeleCheck; as well as Internet commerce and mobile payment solutions. The company's STAR Network offers PIN-secured debit acceptance at 2.1 million ATM and retail locations. Through First Data's centers of excellence, such as security, analytics, customer loyalty and mobile payments, it offers data-driven commerce solutions for customers around the globe. For more information, visit www.firstdata.com.
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SOURCE: First Data Corp.
First Data Corp.
Silvio Tavares, 303-967-8276
silvio.tavares@firstdata.com
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